An analysis of methods to reform Medicare payment for physician services

Abstract

Congress and the administration are changing Medicare's method of paying for physician services, with the intention of reducing the growth in or absolute level of Medicare payment rates. We analyzed the implications of four possible strategies for payment reform: modifications to the present system of paying by customary, prevailing, and reasonable (CPR) charges; payment based on fee schedules; payment for packages of related services; and capitation payment. In some cases, improved quality or access may result. The inherent danger is that constraining program expenditures may impair access to and quality of care to beneficiaries, especially for poor or infirm people, who are more vulnerable. Thus, any payment reform will require careful monitoring to safeguard beneficiaries' quality of care.